Marketplace Report: Delphi Seeks to Cancel ContractsAuto parts maker Delphi Corp. proposes a broad reorganization of its business that would include cancelling its U.S. labor contracts. Tess Vigeland of Marketplace tells Alex Chadwick that the move could have an impact on General Motors, which relies heavily on Delphi parts.

Auto parts maker Delphi Corp. proposes a broad reorganization of its business that would include cancelling its U.S. labor contracts. Tess Vigeland of Marketplace tells Alex Chadwick that the move could have an impact on General Motors, which relies heavily on Delphi parts.

ALEX CHADWICK, host:

Back now with DAY TO DAY.

Auto parts supplier Delphi says it's going to ask a bankruptcy court judge to void all contracts with its unions, including the United Auto Workers. The UAW is threatening to strike, a move that could further cripple the ailing U.S. auto industry. Delphi's the larges auto parts supplier in the U.S. Marketplace's Tess Vigeland is here.

Tess, what is Delphi asking the union to do, and why take such a drastic step as canceling labor contracts?

Ms. TESS VIGELAND (Marketplace): Well, the talks have been going on for months, ever since Delphi filed for a Chapter 11 bankruptcy back in October, and it's been asking for very deep wage cuts as part of its restructuring strategy, and the UAW has repeatedly said no. General Motors is a big part of this as well. Delphi, of course, was spun off from the company seven years ago, and Delphi has asked GM to help pay for some one-time bonuses for union workers, but the three parties have not been able to reach a deal, so today Delphi made this move. It also says it's laying off 25 percent of its salaried employees and says it's closing or selling all but eight of its 29 plants.

CHADWICK: Boy, that is really tough. How soon might the strike come, do you know? And doesn't Delphi now supply every major automaker, not just GM?

Ms. VIGELAND: Well, a strike wouldn't come until after a judge makes a decision, and that could be several months from now. And yes, GM is Delphi's biggest buyer. Ford is a customer; Nissan is a customer; everybody is a customer in the auto industry. I spoke with Harley Shaiken, who teaches labor law at Berkeley, and he says the potential repercussions here are huge.

Professor HARLEY SHAIKEN (Berkeley): A strike could liquidate Delphi and cripple General Motors. The UAW, my sense is, does not want the strike, but it's prepared to strike if it feels the company is playing hardball, because it's not just tearing up the contract for Delphi workers; it would be setting a new standard for all auto parts workers today and likely for unionized auto workers at the Detroit Three in 2007.

Ms. VIGELAND: And most analysts are predicting that any UAW strike would be just the last straw for GM and push it into bankruptcy as well.

CHADWICK: Haven't we seen a lot of cases the last couple of years, companies going to bankruptcy judges to have labor contracts torn up?

Ms. VIGELAND: Yeah, absolutely. Last year was really the year for that in the airline industry, and judges have been saying yes to these requests. This year, it's the auto industry. Tower Automotive did it back in February; now Delphi. But Shaiken says that this is going to be a different situation than the airlines because you're talking about tearing up a contract with the UAW, a far more powerful union than the individual flight attendants or mechanics unions at each airline. And of course the UAW has slammed Delphi for even considering this move, but they say they will continue negotiating.

And we'll have much more on this later today on Marketplace.

CHADWICK: Thank you, Tess. Tess Vigeland of public radio's daily business show, Marketplace, from American Public Media.

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